Cramer: Chico’s Proves Ailing Retailers Can Make a Comeback

Apparel retailer Chico’s would do well not to follow in JC Penney’s footsteps, Jim Cramer said Thursday on CNBC's "Mad Money."

Back in 2011, Apple's Ron Johnson took over the reins at JC Penneywith the aim of completely revamping the look and feel of the stores. He opted to get rid of store coupons and adjusted earnings estimates up rather than down, in what Cramer called "a remarkable bit of hubris." He also eliminated the dividend entirely in an effort to save a battered balance sheet.

But, as evidenced by the 19-percent plunge in same-store sales as consumers flocked to Target, Macy's and Wal-Mart, Johnson made all the wrong moves.

Instead, the company should have taken a leaf from Chico's book, Cramer said.

Despite Chico's setbacks and its meager pricing of $3 a share back in 2009, the firm made a comeback when it brought in David Dyer, former president and CEO of Tommy Hilfiger and Land's End. Dyer was a retired retail leader with a great track record, not a young tech executive, Cramer said.

And unlike Johnson's "speak loudly approach" to marketing, Dyer harbored a more low-key attitude, making "no splash at all" and embracing the classic "under-promise and over-deliver" technique. He quietly restructured various divisions and brought the business back to its original roots — of small stores and catering to its 30-year-old female clientele.

He also streamlined costs and focused on profitability first and growth second.

The bottom line: “The proof is in the pudding," Cramer said. "Dyer’s taken Chico’s from $3 to $15 in just three years’ time and he’s set the stage for multiple years of growth going forward." And unlike JC Penney, he thinks the stock is going higher.